Strategy Crisis Spreads…Will Bitcoin Also Waver?

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A warning has emerged that a company considered one of Bitcoin's biggest supporters could actually undermine the market—Peter Schiff directly targeted Strategy's structural risks.

According to crypto media outlet Bitcoinist on April 29 (local time), Peter Schiff raised the 'possibility of collapse', stating that Strategy's Bitcoin (BTC)-based financing model would be difficult to sustain in the long term. In particular, the structure of the preferred stock 'STRC' issued by the company was identified as a key risk.

STRC is structured to provide investors with a variable return of approximately 11.5%, and some believe that it can be sustained even if Bitcoin rises by only 2% annually. However, Schiff pointed out that this assumption does not hold if Strategy continues to issue new STRCs. He explained that as issuance increases, the amount of returns to be paid out grows, requiring Bitcoin's appreciation rate to also increase.

The problem arises if the STRC price falls below the baseline of 100. To defend against this, the company would likely have to offer higher returns, which in turn leads to a vicious cycle of increasing payment burdens. Schiff analyzed that this structure ultimately operates in a way that self-amplifies its burdens.

A greater risk is that this process could lead to a 'Death Spiral'. If Strategy sells its held Bitcoin to pay investor returns, downward price pressure will occur, which could lead to a decrease in the value of its held assets and further selling pressure. This creates a structure where price declines and increasing payment burdens amplify each other.

Schiff warned that to break this vicious cycle, STRC-related payments would have to be halted, but this could lead to a sharp drop in the value of the product and a decline in stock price. He emphasized that since Strategy and Bitcoin are closely linked, the possibility of cracks in a specific structure spreading throughout the market cannot be ruled out.

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